Production is likely to be 1.73 mt this year, according to govt estimates

After a gap of one year, castor seed futures contracts were re-launched last week on the National Commodity and Der­ivatives Exchange (NCDEX), while the Multi Commodity Exchange (MCX) too launched the contracts for the first time. As far as prices are concerned, market is expecting some corrections till April before they move up post-harvest season.
The contracts expiring in February, March, April and May were available for trading on the NCDEX platform from January 5. NCDEX had suspended the trade in January last year “to protect the integrity of the market”. It had suspected manipulation and concentration of trades. The Securities and Exchange Board of India (Sebi) had barred 16 entities, including four trading members and their defaulting clients, from accessing the market for suspected fraudulent and unfair trade practices.
Granting approvals, Sebi asked the exchanges to ensure that the quality of commodities deposited meets all compliance requirements under rules, including that of the Food Safety and Standards Authority of India (FSSAI). The contracts too will have to be as per rules and regulations of Sebi and as per the approved contract specifications and launch calendar.
“When NCDEX suspended the trade in January 2016, the prices were close to Rs 3,050 per quintal for the February delivery due to higher carryover stocks and anticipation of higher castor harvest. After a year, the opening price of the contract is Rs 3,851 per quintal on NCDEX and Rs 3,832 per quintal on MCX. In last one year, the fundamentals have changed as carryover stocks have depleted due to lower production and lesser acreage,” said Ritesh Kumar Sahu, analyst, agri commodities, Angel Commodities.
In 2016-17, castor seed acreage has declined by about 24.2 per cent to 840,000 hectares compared with last year’s 1.108 million hectares, according to the Solvent Extractors’ Association (SEA) of India. Castor needs lesser water for cultivation and it is cultivated more when rains are scarce. A better monsoon saw several farmers shifting to groundnut, mustard and soybean this year. The remunerations from these crops were better last year and the minimum support price of groundnut too has been raised.
The government estimates castor crop to be 1.73 million tonnes this year, but according to trade sources it could be 1.4-1.5 million tonnes. Production was as high as 2.2 million tonnes in 2011-12.
Last year saw the lowest production in five years. This led to lesser carryover stocks.
Castor is grown as a kharif crop and major producing states are Gujarat, Andhra Pradesh and Rajasthan. Gujarat is the key growing state followed by Andhra Pradesh and Rajasthan. Castor seed sowing starts in July-August and arrivals at mandis begin from December and go on till April. Castor oil is mainly used for manufacturing of medicines, soaps, cosmetics, paints and as lubricants. It is also major source of bio-fuel.
While India, China, Brazil, Russia, Ethiopia and the Philippines are the major producers of castor seed, China, European Union and Brazil are the major consumers.
India is the biggest exporter of the castor oil, accounting for 70 per cent of the total trade followed by China and Brazil.
Export of castor oil has been stagnant in the past few years at around 500,000 tonnes and this has been putting pressure on castor oil prices. Export of castor meal too has been declining in recent years due to less demand from South Korea, one on the largest importers of the product from India. Castor meal exports dropped to 414,000 tonnes in 2015-16 compared with 534,000 tonnes in 2013-14.
According to Sahu, the lacklustre export demand coupled with the arrival pressure will keep prices under check till April. Prices can come down to Rs 3,600-3,700 per quintal. However, once the arrivals ease, lower production and lesser carryover stocks will support rise in prices above Rs 4,000 per quintal.
“Rise in crude oil prices too will support castor oil as it is being used as an alternative fuel,” said Hareesh V, head, commodity research, Geofin Comtrade.